Building Value from Values

How can people of faith navigate the complex issue of investing according to their deeply-held values?

Can the way one invests really align with their commitment to a religious mission?

During his recent visit to the United States, Pope Francis urged us all to tackle global challenges, such as climate change and helping the less fortunate. The Pope’s words have thrust into the spotlight the larger mission of living a positive life consistent with values and mission—and that includes how and where we invest.

By following a holistic faith-based investment strategy, investors can now be sure that the ways in which they commit capital embrace the full tenets of their faith and teachings.

Faith-based investing throughout history

Though interest in faith-based investing has surged recently, the idea of investing according to one’s values is far from a new concept.

More than 200 years ago, Methodist entities “screened” investments in companies that manufactured alcohol, tobacco or promoted gambling. Around the same time, Quaker values such as peace, simplicity, integrity and justice, helped steer the Friends Fiduciary Corporation into established guidelines that avoided investing contrary to values and mission.

In the late 1960s, Roman Catholics, alongside Protestants and other denominations, spoke out publicly against Apartheid in South Africa. Religious sisters are credited with taking further action. After pooling their retirement assets, they filed shareholder resolutions to confront corporations that had not adopted the Sullivan Principles, which detail that all employees should be treated equally, regardless of race.

Today, we see a growing landscape of interdenominational investors who view the management of their investments as an extension of their mission and as a powerful catalyst for social and environmental change.

Creating a faith-based investment strategy

Since faith is so personal, it naturally follows that faith-based investment goals will be highly tailored based on every individual’s unique set of values. Once an individual or institution has decided to integrate a faith-based approach to investing, a Morgan Stanley Financial Advisor can guide the process of building an investment plan that integrates the investor’s financial and faith-based goals.

As part of setting investor expectations, this investment plan should appropriately build in flexibility to allow any investment strategy to evolve over time based on market conditions and opportunities.

The first approach is Values Alignment or restriction screening, which is designed to avoid objectionable businesses and investments. For example, the Catholic Values Guidelines2 avoid companies which derive revenue from tobacco, weapons, or run counter to the mission of protecting all human life.

A second approach is positive screening which promotes investments in companies that meet the environmental, global and social challenges we face today. As you might imagine, this approach resonates with faith-based and non-faith-based investors alike. In fact, even outside faith based approaches, Environmental, Social and Governance (ESG)-Integration is gaining increasing interest as an investment strategy.

By understanding the variety of investment options, faith-based investors can take heart that the power of their capital can help them achieve both their financial and faith-based goals.

Exposure to a variety of investments

A typical misconception about faith-based investing is that aligning investments with one’s values means sacrificing return objectives. However, because of the increasing interest in faith-based investing, there is a now growing landscape of investment choices.

Today, faith-based investors have opportunities across virtually every asset class in their portfolio, achieving different approaches to alignment – from restriction screening to ESG-Integration and more. In addition, investors can choose to align their entire portfolio based on financial and faith-based objectives, or just a portion.

Part of the Investing with Impact platform

Faith-based investing strategies are just one aspect of Morgan Stanley’s Investing with Impact Platform. Launched in 2012 as part of the firm wide commitment to sustainable investing, we define Investing with Impact as an investment approach that aims to generate market-rate financial returns while demonstrating positive environmental and/or social impact. Investing with Impact empowers our clients—from individuals to institutions—to align their investments with their values and mission including faith-based investors.

In Morgan Stanley’s view, there is no single motivation to pursuing Investing with Impact and faith-based investing, and certainly more than one approach to implementing. We are proud to partner with our clients to take action towards aligning investments with personal and institutional values.

1 The returns on a portfolio consisting primarily of faith-based investments may be lower or higher than a portfolio that is more diversified or where decisions are based solely on investment considerations.

2 The Catholic Values guidelines were outlined by the United States Conference of Catholic Bishops (“USCCB”) in 2003 to delineate specific areas for investors to consider as part of their investment selection process.